SaaS in Tough Economic Times

If you google "saas recession" (as I just did), you'll find dozens of articles published throughout 2008 and into 2009 that suggest that SaaS companies will thrive in a difficult economy.

"SaaS is also popular on Wall Street these days. Companies such as Concur and Salesforce.com haven't missed earnings estimates, mainly because they have predictable revenue streams." - "A Recession-Proof Corner Of The Tech Sector", Sramana Mitra, Forbes.com Commentary, January 18, 2008.

"As IT is tasked to do more with less, that's an opportunity for SaaS to get a foot in the door." - "Is The Recession Good For Saas?", Andrew Conry-Murray, Information Week blog, May 2, 2008.

"In bad economic times many companies will want to preserve cash. Those companies will heavily prefer the SaaS model." - "Is SaaS Recession-Proof?", Paul Massey, GLG Group's The Expert Network, January 15, 2009.

"So, are managed services and SaaS the perfect antidote to a sick economy? I think not. But if I had a few extra bucks for tech investments, the most compelling bets remain SaaS, managed services and open source." - "Recession Proof Software? Try SaaS, Managed Services and Open Source", Joe Panetierri, Seeking Alpha, January 15, 2009.

We've seen some very encouraging signs at AdvancedMD, including a very strong sales month in January. (Of course, it's difficult to know whether strong sales are tied more to our business model and the economy or stronger sales efforts...but I believe both are in play.)

A worrisome aspect of the SaaS model is that, because it relies on continuing recurring revenue, it depends on the success of customers. In other words, absent new sales, if 10% of your customers go out of business, you've just lost 10% of your revenue. (On the other hand, a 10% dip in revenue is far preferable to the kinds of dips experienced by on-premise software companies.)

What that means to AdvancedMD is that we need to have even greater interest in our customers' financial success. Since we're so deeply embedded in their cash flow, we are in a unique position to help our customers reduce costs and maximize reimbursement.

Past efforts in this area have produced features such as online eligibility and claim scrubbing (known to our customers as eEligibility and Claim Inspector, respectively), as well as extensive auditing of claims volume and exclusion data to identify opportunies to reduce rejections and minimize A/R aging.

Our most recent release introduces significant improvements to takebacks, one of the most time-consuming aspects of medical billing. This should result in much greater efficiency for many of our customers, allowing staff to focus on revenue generating activies such as collections and denial follow-up.

Throughout our history, we have focused heavily on "getting the doctor paid", perhaps at the expense of flashier features. We have done so without any foreknowledge of the current economic troubles, but our customers are benefiting from that focus, as well as the ability that our SaaS technology model allows us to respond to shifting economic conditions.